Money Matters, Simplified.
Supreme Court approves the Chrysler-Fiat alliance
by Jaspreet Virk - June 10, 2009 - comments
Fiat will hold 20 percent stake, a union trust 68 percent, and the Canadian and U.S. governments the remaining 12 percent stake in the resurrected Chrysler
New York, June 10: In a move to revive the troubled Detroit automaker Chrysler, the U.S. Supreme Court cleared the way for the transfer of its assets and management control to Italian carmaker Fiat.
With the deal likely to be finalized today, Fiat would acquire 20 percent stake, 68 percent would be owned by a union trust, and the Canadian and U.S. governments would control 12 percent, thus allowing Chrysler to re-emerge from bankruptcy.
As the result of the deal, a group of banks, hedge funds and Indiana Pension Funds will receive $2 billion as compensation for the $6.9 billion they held in secured debts.
Hearing denied to pension funds
While the group of Indiana pension funds, holding $42 million debt in Chrysler, opposed the treatment meted out to them in the form of reorganization process with Fiat, the court denied hearing to the pension funds and upheld the decision of Chrysler- Fiat alliance.
While refusing the hearing to the pension funds, the Supreme Court issued a statement saying that the aggrieved parties must convince four out of nine judges that the matter is serious to warrants full appeal.
Indiana Treasurer Richard Mourdock, who led the cause of the pension funds, said that he was disappointed. “The United States government has, I continue to believe, acted egregiously by taking away the traditional rights held by secured creditors.”
Reaction to the ruling
The White House, applauding the decision, said, "The Chrysler-Fiat alliance can now go forward, allowing Chrysler to re-emerge as a competitive and viable automaker."
"The new company will build upon Chrysler's proud history of innovation and Fiat's technology and expertise to expand Chrysler's product portfolio in the U.S., Canada and overseas," said Chrysler spokeswoman Shawn Morgan.
With the deal being finalized, Fiat will redefine its manufacturing process according to the needs of the U.S. market. This may involve launching the already existing Fiat cars in the market before starting the production process from the scratch.